A SHOCK Parliamentary report is calling for Britain to move CLOSER to the EU - just as the popularity of Brussels plummets to an all-time low.

The House of Lords committee wants Britain to move closer to Brussels[GETTY]

The UK must do all it can to support its EU partners on the path to closer integration.

House of Lords report

The report, by an influential House of Lords committee, urges ministers to "do all it can to support its EU partners on the path to closer integration".

The Committee is worried about the UK becoming "isolated", to the deterement of the powerful City of London.

One expert went as far as to warn that if Britain were to leave the EU, the City could be hit with regulations from Brussels motivated by "resentment" at the UK going it alone.

The report, titled 'Euro area crisis: an update' from the Lords' European Union Committee, has just been published.

But Patrick O'Flynn, Ukip's Director of Communications, dismissed the call for further EU integration and said Britain should focus on "sunrise" economies in the rest of the world.

He said: "Britain should follow its own national interest.

"Of course it is in our interests that trading partners are in robust economic health. But that is unlikely ever to be the case for the weaker southern European economies while they are locked inside the eurozone.

"The time has come for Britain to place more emphasis on seeking out additional markets in the fast-growing,. sunrise parts of the world economy, rather than waiting in vain for a recovery in the sunset zone that is continental Europe."

Former Italian Prime Minister Mario Monti gave evidence to the committee [GETTY]

The report from the 12-member committee, of which five declared interests in various City firms, argued the worst of the financial crisis affecting eurozone countries is now over, although it "would be unwise to conclude that the storm has entirely passed".

In compiling the report, the committee heard evidence from former Italian prime minister Mario Monti, the Governor of the Bank of Finland Erkki Liikanen and the Chief Economic Adviser to the Mayor of London, Gerard Lyons.

In his evidence, Mr Lyons warned the City of London would lose influence across Europe if the UK left the EU.

He said: "At the end of the day, you can only control what you can control yourself and you try to influence the other side.

"In my view, the best scenario would be for Britain to remain within a reformed European Union. The question then is what you reform.

"Speaking to people here in the UK, you come across what I tend to call the regulatory paradox: people do not disagree with individual regulations, but they do not like the mass of regulations.

"In some respects, you could argue that Europe becomes the sort of fall guy. People feel it easy to blame Europe, whereas many of the issues about our economy are really home-grown issues."

Simon Tilford, deputy director of the Centre for European Reform, was even more cautious about Britain leaving the EU.

He said: "There is no doubt that a Britain on the outside of the EU would elicit a lot of resentment within the eurozone.

"If London continued to be the financial centre of the eurozone, that would be seen as a big problem.

"Britain within the EU but not in the euro is not a problem — if we stay in the EU but resist getting involved in further integration with the eurozone, that is fine — but I think that, if we were to leave, the City would over time be vulnerable to regulatory attacks et cetera."

The reports conclusions include concerns around the ongoing "destructively high levels of unemployment and youth unemployment" in Europe and "well deserved credit" for the European Central Bank's (ECB) handling of the eurozone crisis.

But its key conclusion, which will irk eurosceptics, is that "although the UK economy has suffered from the decline in business activity arising from the euro area crisis, it stands to benefit from a prosperous euro area.

"The UK must therefore do all it can to support its EU partners on the path towards closer integration. Nevertheless, such moves towards integration leave the UK in an increasingly isolated position.

"In order to ensure that the UK's interests are effectively promoted, the Government and the Bank of England should therefore maintain and develop constructive relationships with the increasingly powerful euro area authorities, notably the Eurogroup and the ECB."

Responding to the report a Treasury spokesperson said: "A stable euro area is in the interests of all Member States, and the UK supports closer economic and fiscal integration for the euro area to strengthen the single currency.

"At the same time, the UK Government has been clear that it will not be part of closer integration and will protect the interests of those outside the single currency, especially in relation to the Single Market."